Although the American healthcare system has undergone a number of transformations ever since its inception, its present-day state is to a large extent a reflection as well as the product of the country’s own sociopolitical, economic, cultural, technological, and organizational history and tradition (Litman, 1997).
A multiplicity of players, including the government, healthcare institutions, insurance companies, employers, and consumers, have been involved in deciding the architecture of the healthcare system, and therefore can rightly share in the apportioning of benefits and blame brought about by the system.
Employers can be singled out as one group of stakeholders that has been increasingly involved in shaping the healthcare system in the U.S. (Reinhardt, 2001). By looking back into the history of employer-offered healthcare in the U.S., this paper purposes to evaluate why American businesses were originally motivated to offer healthcare provisions for their employees
Employer-offered healthcare in the U.S. was initiated in the 1930s after President Franklin Roosevelt decided not to follow the route of universal socialized medicine.
His decision was largely informed by the fact that healthcare was comparatively cheap and, as such, businesses could be provided with economic incentives to start providing healthcare for their employees (Thomson, 2006). It can therefore be argued that the economic incentives provided by the federal government motivated American businesses to start offering healthcare provisions for their employees.
Another motivation factor came from the fact that businesses could spend less money to adequately satisfy union demands by agreeing to offer healthcare provisions for their employees since the concept had been hatched by the government and enjoyed its full support. Spending less money meant more profits for the businesses, an idea that was too good to be resisted judging by the fact that it was also comparatively cheap to provide healthcare.
Another motivation factor came from the fact that employers were placed in the driver’s seat to manage the healthcare costs for their employees and, as such, they could “…force upon their employees employer-sponsored health insurance products that limited the employees’ choice of providers to defined networks, that often limited direct access to medical specialists, and that sometimes limited somewhat patient’s access to new and expensive medical technology” (Reinhardt, 2001, p. 5).
The implication here is that the employers were well positioned to control the purse of healthcare for employees, and could use the directive of managed-care to ensure that healthcare costs remained minimal, thus enhancing the profitability of the their organizations.
However, this directive had a direct negative implication on the part of employees in terms of receiving sub-standard healthcare provided for by employers. It is imperative to note that this is one of the historical injustices of the American healthcare system that the Obama administration is trying to resolve in the proposed reforms to the system.
Employer-offered healthcare also came with employment-based health insurance, a system that offered wide-ranging perks for the organizations, thus the motivation.
According to Reinhardt (2009), “…Congress further encouraged the growth of employment-based health insurance by treating the employers’ contribution to their employees’ health insurance as a tax-deductible business expense” (para. 5). This arrangement ensured that while businesses continued to be offered with opportunities for profitability in tax cuts, the workers continued to suffer since their own contributions were not viewed as taxable compensation by the authorities.
Surprisingly, and quite unjustly, the tax preferences extended to businesses was not granted to individuals forced to buy health insurance on their own. However, the tax preferences nevertheless served as a motivating factor for employers to offer healthcare provisions and employment-based health insurance for their employees.
Reference List
Litman, T.J. (1997). Health politics and policy, 3rd Ed. New York: Delmar Cengage Learning.
Reinhardt, U.E. (2001). The United States healthcare system: Recent history and prospects. Web.
Reinhardt, U.E. (2009). Is employer-based health insurance worth saving?The New York Times. Web.
Thomson, R.E. (2006). Employer-provided healthcare: Where’s the Justice? Web.